“As you know, Eric, history doesn’t repeat, but it rhymes. And we are now to a place in global markets that is eerily similar to what we have seen in the past. But at the same time we are also now at a place that we have never been before."

“We haven’t had structural problems in the economy, while at the same time carrying such a staggering amount of debt. I guess what that means is that the end game -- what we have to go through to work this out -- is stickier than anything we’ve ever been through before.

We haven’t been in a place before where, as an example, aggregate on balance sheet liabilities of the US government have exceeded the Gross Domestic Product. We haven’t been in a place before where the baby boomers were becoming a drag on the economy, as opposed to being contributers to the economy. That is manifested by the fact that we have, according to the Congressional Budget Office, somewhere between $65 trillion and $75 trillion in off balance sheet liabilities.

Eric, I’m talking to you as a 60 year old, as somebody who is supposedly going to be receiving social security, medicare, medicaid, etc. But the reality is the nation can’t afford these promises to people like me. So, as I said, we have never been in a position like this as a country, and I will be interested to see how we work all of this out.

The reality is that in the United States as well as most of the Western world, we need to find a way to liquidate or default on some of our obligations. All kinds of promises have been made to all kinds of people and countries, but, again, we just can’t afford it.

In my opinion, politicians and the public will choose to default dishonestly by kicking the can down the road. This means significant inflation. This is what we did in the 1970s. The problem today is, can you inflate, but not just inflate, but do it in such a way that you don’t bring the entire financial system crashing down?

It sounds easy -- just inflate. Well, how many trillions of dollars of derivatives are tied to low interest rates, and what happens when those ticking time bombs are detonated? Answer: It ripples through the entire financial system. The truth is there might not be an easy way out of this at all. I’m not saying it can’t be done, I’m just saying I’m really glad nobody elected me to do it.

If the Fed in fact loses control of the bond market, if the Treasury has an auction and nobody shows up to buy, and the interest rates, despite manipulation, moves higher, if that happens the 25-year bond bubble would deflate and all hell would literally break loose.”